Bitcoin: Corporate Interest in Cryptocurrency Is Cooling. Is Its Decline Next?

The October 10 cryptocurrency market crash was predetermined. Trump's statement on new tariffs for China was not the trigger. AI trading — and AI itself — is increasingly dominating the Bitcoin market. This makes the crypto market even more unpredictable for traditional investors, given the regulatory complexities in this sector, as well as the trend among investors to build portfolios using neural networks. But AI works for itself, not for the human investor. As a result, institutional interest in cryptocurrencies is declining. AI is taking over Bitcoin — but does humanity actually need this cryptocurrency?

What happened? From October 10 to 11, the cryptocurrency market experienced a major shock: Bitcoin's price momentarily fell by 15%, while some altcoins lost up to 80%. Wall Street indices also declined. I would note the following: the Nasdaq Composite fell the most (-3.56%) at the end of last week. The S&P 500 and Dow Jones dropped less — by 2.71% and 1.9% respectively.

How are Big Tech — which is increasingly focused on implementing AI technology — and cryptocurrencies connected? It's very simple. The crash in the cryptocurrency market was predictable; it came as no surprise.

There is no conspiracy in the fact that some traders were able to profit from this: they used adequate market modeling of the situation developing in financial markets.

Trump's tariff announcement was merely a cover. The US president's statement about possible new tariffs on imports from China (totaling up to 130%) was simply an attempt to divert the attention of the US investment community from the expected and actual downward correction across all major financial markets.

By itself, it could not have been a trigger. Given how many Chinese goods the US has already excluded from high tariffs, no increase in rates — even to 500% — would fundamentally change the existing status quo in Washington's trade with Beijing.

Cryptocurrency prices had become detached from their market equilibrium values, and a downward correction was inevitable. However, due to the increasing use of AI by traders to model market behavior, the sell-off was excessive.

AI is leading to a crisis — and the cryptocurrency market is first in line. AI is actively used in trading on Wall Street as well, but in the classic stock market there are ways to prevent excessive swings — trading halts and actions by major players. The cryptocurrency market lacks such time-tested mechanisms.

Hence the crash. Moreover, it is clear that the further spread of AI in trading, if it becomes a dominant rather than an assisting tool for investors, is leading the global financial market toward the most severe crisis in its history.

The cryptocurrency market is merely showing how the global financial sector will be destabilized. High volatility is already scaring institutional investors away from the number one cryptocurrency. Fewer and fewer organizations want to follow the corporate strategy of MicroStrategy, which focused its activities on Bitcoin investments. Large investment funds in the West, which ramped up purchases of the oldest cryptocurrency during the peak of the Bitcoin ETF boom, began reducing their holdings in the fall.

AI trading has "poisoned" the cryptocurrency market. AI trading in the cryptocurrency market is becoming a negative factor that repels classical investment funds and banks. The problem is that neural networks replicate the mistakes made by various traders. They cannot independently create an adequate investment behavior model that reflects the realities of today's financial market.

I recall the COVID-19 pandemic period. Custom strategies for building client investment portfolios, manually developed at Otkritie Broker, provided an average one-third increase in returns annually, even as panic gripped global financial markets. Even then, it was clear: brokerage activities cannot be completely handed over to neural networks.

Now the number of companies investing in Bitcoin is slowing. Here's why.

AI trading has "captured" not only direct cryptocurrency trading, but also derivatives (futures and options) on them. This market will predictably experience significant turbulence in the near future due to the use of AI models built on outdated analytical approaches that no longer reflect reality.

The widespread use of AI is already leading to an increase in critical errors, as shown by a recent incident with one of the world's largest auditing firms.

Neural networks cannot create effective hedging pairs. This means that Bitcoin and cryptocurrencies are becoming "things in themselves" — practically unpredictable in their behavior — unless new market analysis models are created. In this regard, it is of secondary importance what percentage of Bitcoin one should hold in a portfolio, as some investment banks recommend. Any percentage is possible — the main thing is to create a hedging pair with an appropriate financial instrument that would allow mitigating the risks of sharp cryptocurrency price swings.

Neural networks are powerless in this regard, as they could not have been trained on such hedging options. And since such solutions currently exist only in bespoke form and are available to a limited circle of investors, mass investors (individuals and legal entities) — to whom most (but not all) Western brokers unjustifiably offer only AI strategies — are becoming disillusioned with the cryptocurrency market.

Cryptocurrency trading platforms remain largely in a regulatory "gray zone." It is worth noting that a significant number of crypto exchanges and decentralized trading platforms worldwide are not fully regulated, and also let traders down by preventing them from executing trades at critical moments. This is another important reason for many to avoid investing in cryptocurrencies.

Essentially, a working investment portfolio strategy that includes cryptocurrencies must thoroughly account for this aspect and establish a reliable "roadmap" for working only with regulated platforms.

I am convinced that if brokerage clients are not explained all of this, and it is assumed that operations will take place on platforms in the "gray zone" of state and global regulation, nothing good can come of it.

What should be regulated first — AI or cryptocurrencies? It is worth noting that international financial institutions, including the IMF and the Bank for International Settlements, continue to push countries toward stricter control over cryptocurrencies, limiting opportunities for large-scale institutional investment, which adds pressure on Bitcoin and its volatility.

Russia is also preparing new legislation regarding the cryptocurrency market, but I believe it is important to consider how "infected" this segment of the financial market is with AI. In the current situation, it is worth simultaneously considering the regulation of both AI and the cryptocurrency market — and starting with the former.

One may have different attitudes toward AI, but one must see how AI's growing independence in global finance is leading to an inevitable global financial crisis, as mentioned above. The question now is how each country can best prepare for it while there is time, and minimize the consequences for the economy, which could be quite devastating.

Bitcoin will be taken over by AI structures. Against the backdrop of growing competition from various blockchains and the persistent instability of the crypto market, Bitcoin's prospects as a universal investment asset look increasingly murky. Bitcoin faces a number of challenges, including those related to the new wave of development in fintech, AI, and quantum programming.

The interface for working with Bitcoin remains risky and backward compared to the capabilities offered by modern stock market infrastructure and fintech.

AI, which has entered Bitcoin trading, is leading to a new trend that many have yet to see: Bitcoin will increasingly be accumulated by AI structures, even if they formally remain on the balance sheets of "ordinary" companies.

Essentially, a game of AI investor versus human investor is beginning in this market — one in which the latter is increasingly losing, as they themselves rely on advice from neural networks. This is simply a direct surrender of positions in this game.

Does humanity need Bitcoin? If human society needs Bitcoin, then it must fight for it. But is it worth it? The updates to the number one cryptocurrency's protocol, which will be actively promoted by AI in the near future, will further "dehumanize" this digital asset, making it unnecessary for humans.

The appearance of NFTs on the Bitcoin blockchain has already slowed its operation, and it will become even more unwieldy in the future.

Quantum programming is fertile ground for the future development of AI, and soon neural networks will be deciding whether to destroy the Bitcoin blockchain or leave it as it is.

Why does a person need Bitcoin then — that is the big question. As for AI, Bitcoin is an artifact of human thought that interests AI from the perspective of organizing large-scale resource redistribution in global finance.

This is also hinted at by Trump's team when they talk about the possibility of paying off the US national debt with Bitcoin — an idea suggested by neural networks. However, if I were in Trump's shoes, I would not trust these recommendations: AI plays only for itself, not for anyone else's interests.